There is no greater responsibility than becoming a parent. You have so much to do and so little time before your baby arrives. You need to decorate the nursery. Buy a stroller. Childproof the house. But getting a handle on post-baby finances tops your agenda. Use the checklist on the left to get help.

Whether you’re having your first child or adding to your family, you should include child-related costs in your budget.

According to the federal government, a husband-wife family earning just under $60,000 before taxes will have $10,600 to $11,660 in extra expenses, depending on the age of their child. You also may incur big expenses such as moving to a bigger house or buying a larger car.

Until your child arrives, it will be difficult to accurately estimate how your monthly expenses will grow. But it’s important to try. Here are some guidelines.

Additional annual costs* over the first two years will include:1

Housing - $3,890

Food - $1,230

Transportation - $1,360

Clothing - $410

Healthcare - $750

Childcare - $1,890

*Assumes child born to couples with average income of $59,300.

Before you start buying things for your baby, know what you need, how much you’re willing to spend, and where the money will come from. Pick up a copy of Baby Bargains by Alan and Denise Fields for reviews on hundreds of baby products. Avoid going into debt while outfitting the nursery. Your goal is to create a stable and nurturing environment for your baby—not to incur crippling debt that will weaken your financial prospects.

Be sure to budget for other startup costs, including paying for the hospital delivery and accounting for any unpaid leave at work. And if your spouse or partner plans to stay home, make sure you can afford to live on one income and adjust your spending habits accordingly—preferably before the baby comes to give the arrangement a test run.

After baby arrives and life settles down, make sure there’s room in your monthly budget for things like diapers, formula, clothes, toys, doctor visits, photo developing, and babysitters. One way to free up cash: Pay off your high-interest debt. Use the money you save on interest and monthly payments for your baby’s needs. Plus, you'll probably be spending more time at home than going out on the town, so your entertainment expenses should decrease, freeing up more cash.

1Expenditures on Children by Families, 2006, U.S. Department of Agriculture, pg. ii

Find Childcare

Shop carefully for a daycare provider. You want to sleep at night.

Finding the right daycare provider is one of the most important decisions you will make before returning to work. Your assignment: think through your options, interview carefully, and listen to your parental instincts.

Providers vary by type and cost. But the most important selection factor is your peace of mind. Make sure your child’s caregiver will provide a safe and appropriate environment.

If you have access to an Employee Assistance Program (EAP), see if it can provide a referral to a local licensed provider.

Here are your daycare choices and the pros and cons of each:

Daycare Centers

One of the most economical types of daycare is a daycare center. These facilities should be licensed and staffed by trained caretakers. They can be part of a chain or individually owned (connected to a church, school, or community center).

Pros:

You are free to drop in and visit any time. The flurry of activity can be stimulating and entertaining to babies and young children. Many daycare facilities also provide educational activities for pre-school age children.

Cons:

Daycare centers are usually closed during holidays. They often have high turnover of workers. High fees for early drop-off or late pick-up can apply (as much as $1 per minute). If your child gets sick, you may need to take a sick day yourself.

Family Day Care

Another economical option is family daycare. These involve caregivers taking children into their own homes. Like a traditional daycare center, they should be licensed and staffed by trained and certified caregivers.

Pros:

Since they are based at a residence, family daycares tend to be conveniently located and inexpensive.

Cons:

Practices are not standardized, so make sure the owner’s ideas about childcare match yours. Elicit views on napping, feeding, playing, and discipline. Check references and background information both for the caregiver and for other family members who live there. Providers also may not offer a pre-school curriculum.

Nanny/Au Pair

Whether live-in or not, both nannies and au pairs care for your child in your own home. You can find qualified candidates through agencies, other moms, your doctor, or schools.

Pros:

Your child gets one-on-one attention in the safety of your home. You don’t have to go through the hassle of getting your baby to an outside location each morning. Housecleaning can be part of the caregiver’s duties.

Cons:

It is expensive. You are now an employer, so if you want to be above-board (a good idea), withhold money for taxes and pay Social Security, unemployment, and whatever else your state laws demand. You may also have to cover worker’s compensation; check to see what your homeowner’s or renter’s insurance policy offers.

Hiring an au pair usually means paying for the person’s flight to your city and providing a rent-free room. You’ll also need to arrange for back-up care in case the person gets sick. The service of nannies or au pairs is unregulated.

Daycare Expenses

Daycare expenses typically account for the largest share of post-baby expenses. One way to save money is to utilize a Flexible Spending Account (FSA) if one is offered through your employer or your spouse’s employer. Utilizing a Flexible Spending Account will allow you to pay for dependent care expenses on a tax-free basis, thereby saving approximately 20 to 30 percent of the cost.

Understand Maternity Leave

How long can you stay home?

If you're a working Mom, you've undoubtedly thought about maternity leave. If you’re a working Dad, you may have considered paternity leave, as well. Talk to your employer to understand your options.

Maternity leave, now often called parental or family leave, is the time a mother (or father) takes off from work for the birth or adoption of a child.

The Family and Medical Leave Act (FMLA), which was passed in 1993, entitles eligible workers to up to 12 weeks of job-protected medical leave for birth or adoption. However, the FMLA doesn't cover those who work for smaller companies and guarantees only unpaid leaves.

In addition to the federal FMLA law, various states have passed their own maternity leave legislation.

Leave policies vary greatly by company. Have your spouse or partner get the details from his or her human resources department.

Get Insured

Having a child means you have more to protect. Time to think about insurance.

As a new parent, you don’t want an unforeseen event to weaken your family’s finances. Make time now to identify—and fill—the gaps in your insurance program.

Let's face it: It's hard to buy a product that you can't see and really hope you'll never use. But unless you're wealthy enough to weather any foreseeable (and unforeseeable) financial storms, marriage is time to start shopping for insurance.

Make sure you have insurance to protect you and your spouse against the major risks your family faces:

Dying too soon

Getting hurt or sick

Not being able to work because of an illness or accident

Having an auto accident (personal injuries and damage)

Having a visitor get hurt in your home or on your property

Having your home damaged by a storm or other event

Each of these events can have a strong negative impact on your finances. To protect yourself, know what your risks are, familiarize yourself with insurance against those risks, and get expert help.

As a first step, learn more about the five main types of insurance.

Life Insurance

Think about the financial impact if you or your spouse or partner were to die. Could the surviving parent make do on one income? If the person had to find a job, how would he or she pay for daycare? And what about continuing to save for college or retirement? A good rule of thumb is to buy enough life insurance to equal four to five times your annual salary. Stay-at-home spouses may need their own policy to help pay for childcare in case of their death.

Health Insurance

The first year of your baby’s life will be full of visits to the pediatrician for weigh-ins, vaccinations, and the occasional prescription. Take steps now to make sure you have a comprehensive health insurance plan in place by the time baby arrives.

It’s usually not difficult to add your child to the health plan you have at work or to your personal plan. But do consider whether the plan has the services you need—such as well-baby care—at a price you can afford. Bear in mind that health plans usually charge more and may impose higher out-of-pocket costs once you add a child to the plan.

Now may be a good time to consider making changes to your coverage or selecting another type of plan. Before taking action, learn more about the features and cost differences between various types of health plans. Above all, make sure you are comfortable with what your policy will and will not cover and that it allows you to seek care from the physicians and pediatricians you prefer.

Finally, if you have no health insurance, take steps now to either buy individual health insurance or get covered under a government-mandated plan

Disability Insurance

Although life insurance is important, you’re far more likely to get injured on the job than to die. So make sure you have enough disability insurance to pay your bills and maintain your standard of living in case you can’t work. You already may have coverage at work. Long-term disability plans typically cover up to 60% of your salary. Check with your employer to see exactly what’s provided. Then look at your budget to see how much of a disability benefit you’d need to meet your monthly obligations. If there’s a gap between what your employer provides and what you need, ask about supplemental or voluntary coverages. If your employer offers no disability benefits at all, consider purchasing your own individual policy.

Automobile Insurance

Will you need to buy a new car to accommodate your larger family? If so, be sure to update your auto insurance. While you’re at it, ask your insurer or insurance agent if you’re eligible for any discounts. Once you know how much your updated auto insurance will cost, ask several other insurers for a price quote. Most people save a substantial amount by shopping around for car insurance.

Homeowners or Renters Insurance

The arrival of a new child often triggers a need for more living space. Now is the time to evaluate whether or not you need a bigger house. Remember to update your homeowners insurance or apply for a policy if you are buying a home for the first time. This may also be a good time to shop around and make sure that you are paying the best premiums for your policy.

Insurance Information Institute

Save for College

College for a newborn baby seems far away. It’s not.

With tuition costs rising every year, it doesn’t pay to wait. Start your child’s college savings program now. There are several ways to save tax free for college.

529 plans: college savings plans

There are two types of 529 plans--college savings plans and prepaid tuition plans. Though each is governed under Section 529 of the Internal Revenue Code (hence the name "529" plans), college savings plans and prepaid tuition plans are very different college savings vehicles.

A college savings plan is a tax-advantaged college savings vehicle that lets you save money for college in an individual investment account. Some plans let you enroll directly, while others require that you go through a financial professional. The details of college savings plans vary by state, but the basics are the same:

You fill out an application--you are called the account owner or the participant. You name a beneficiary and a successor participant (who would assume control of the account at your death). You also choose one or more of the plan's pre-established investment portfolios for your contributions. Most plans offer a range of investment portfolios that vary in risk.

You (or someone else) contribute money to the account as often as you wish, subject to plan limits.

The financial institution that the state has designated to run its plan is solely responsible for managing the plan's investment portfolios; you have no control over how these portfolios are run.

Your contributions grow tax deferred, which means you don't pay income tax on the account's earnings each year. Some states (but not the federal government) may also let you deduct your contributions.

Money withdrawn to pay college expenses (a qualified withdrawal) is tax-free at the federal level, and may also be tax-free at the state level.

If the money isn't used for college (a nonqualified withdrawal), you'll owe income tax and a 10 percent federal penalty on the earnings portion of the withdrawal.

Anyone can open a college savings plan account--your ability to contribute doesn't depend on your income or your status as a parent. Money in the plan can be used at any college in the United States or abroad that's accredited by the U.S. Department of Education. And, if your child decides not to go to college or gets a scholarship, the account can be transferred to a sibling or other qualified family member without penalty. Plus, if you're unhappy with your plan for any reason, you can switch (rollover) your funds to a different 529 plan (college savings plan or prepaid tuition plan) once every 12 months without penalty. Your state may even offer tax breaks too, like a deduction for contributions or tax-free withdrawals.

But college savings plans have drawbacks too. You relinquish some control of your money. Returns aren't guaranteed--you roll the dice with the investment portfolios you've chosen, and your account may gain or lose money. Also, there are fees typically associated with opening and maintaining an account (e.g., an annual maintenance fee, administrative fees, and investment expenses based on a percentage of total account value).

529 plans: prepaid tuition plans

Prepaid tuition plans are distant cousins to college savings plans--their federal tax treatment is the same, but just about everything else is different. A prepaid tuition plan is a tax-advantaged college savings vehicle that lets you prepay tuition expenses now for use in the future.

Prepaid tuition plans can be run either by states or colleges. For state-run plans, you prepay tuition at one or more state colleges; for college-run plans, you prepay tuition at the participating college(s). Although the details of prepaid tuition plans vary by state, the basics are the same:

You fill out an application--you are called the account owner or the participant. You name a beneficiary and a successor participant (who would assume control of the account at your death).

You (or someone else) purchase an amount of tuition credits or units in a lump sum or periodically, subject to plan rules and limits. Typically, the tuition credits or units are guaranteed to be worth a certain amount of tuition in the future, no matter how much college costs may increase.

Your contributions are pooled together with those of other participants into a general fund, and the money is invested. At a minimum, the plan hopes to earn an annual return equal to the annual rate of college inflation for participating colleges.

Your contributions grow tax deferred, which means you don't pay income tax on the account's earnings each year. Some states (but not the federal government) also let you deduct your contributions.

Money you withdraw to pay college expenses (a qualified withdrawal) is tax-free at the federal level, and may also be tax-free at the state level.

If the money isn't used for college (a nonqualified withdrawal), you'll owe income tax and a 10 percent federal penalty on the earnings portion of the withdrawal.

But prepaid tuition plans have drawbacks too. One major disadvantage is that your child is limited to the participating colleges--if your child attends a different college, plans differ on how much money you'll get back. Also, if the plan earns more than the relevant college inflation rate, you're not necessarily entitled to the difference. Keep in mind, too, that there are fees typically associated with opening and maintaining the account (e.g., an enrollment fee and administrative fees). Finally, some prepaid plans have been forced to reduce plan benefits after enrollment due to investment returns that have not kept pace with the plan's offered benefits.

Coverdell education savings accounts

A Coverdell education savings account (Coverdell ESA) is a tax-advantaged education savings vehicle that lets you save money for college, as well as for elementary and secondary school (K-12) at public, private, or religious schools. Here's how it works:

You fill out an application at a participating financial institution and name a beneficiary. Depending on the institution, there may be fees associated with opening and maintaining the account. Keep in mind that the beneficiary of a Coverdell ESA must be under age 18 when the account is established (unless the beneficiary is a child with special needs).

You (or someone else) make contributions to the account, subject to the maximum annual limit of $2,000. This means that the total amount contributed for a particular beneficiary in a given year can't exceed $2,000, even if the money comes from different people.

You invest your contributions as you wish (e.g., stocks, bonds, mutual funds, certificates of deposit)--you have sole control over your investments.

Contributions to your account grow tax deferred, which means you don't pay income taxes on the account's earnings each year.

Money withdrawn to pay college or K-12 expenses (a qualified withdrawal) is tax-free at the federal level, and typically at the state level too.

If the money isn't used for college or K-12 expenses (a nonqualified withdrawal), you'll owe income tax (at the beneficiary's tax rate) and a 10 percent federal penalty on the earnings portion of the withdrawal.

Any funds remaining in a Coverdell ESA must be distributed to the beneficiary when he or she reaches age 30 (unless the beneficiary is a person with special needs).

Unfortunately, not everyone can open a Coverdell ESA--your ability to contribute depends on your income. To make a full contribution, single filers must have a modified adjusted gross income (MAGI) of $95,000 or less, and joint filers must have a MAGI of $190,000 or less.

Custodial accounts

Before 529 plans and Coverdell ESAs, there were custodial accounts. A custodial account allows your child to hold assets that he or she ordinarily wouldn't be allowed to hold in his or her own name. The assets can then be used to pay for college or anything else that benefits your child (e.g., summer camp, braces, hockey lessons, a computer). Here's how a custodial account works:

You fill out an application at a participating financial institution and name a beneficiary. Depending on the institution, there may be fees associated with opening and maintaining the account.

You also designate a custodian to manage and invest the account's assets. The custodian can be you, a friend, a relative, or a financial institution. Keep in mind, though, that if a parent serves as custodian, the entire value of the account will be included in the parent's gross estate if the parent dies while serving as custodian.

You (or someone else) contribute assets to the account. Whether your state has enacted the Uniform Gifts to Minors Act (UGMA) or the Uniform Transfers to Minors Act (UTMA) will determine the type of assets you are allowed to contribute (the UTMA allows more types of property than the UGMA, and most states have enacted the UTMA).

The account earnings are taxed every year at your child's tax rate. Assuming your child is in a lower tax bracket than you, you'll reap greater tax savings than if you had held the assets in your name. This opportunity for tax savings is extremely limited for children under the age of 18, however, because of the kiddie tax rules. Under the kiddie tax rules, any income over $1,700 is taxed at your rate, not your child's rate.

Despite the potential tax savings, custodial accounts have a serious drawback: all gifts to a custodial account are irrevocable. When your child reaches the age of majority (as defined by state law, typically 18 or 21), the account terminates and your child receives the money free and clear of parental influence. Some children may not be able to handle this responsibility, or might decide not to spend the money for college.

Financial aid impact

Your college saving decisions impact the financial aid process. Come financial aid time, your family's income and assets are run through a formula at both the federal level and the college (institutional) level to determine how much money your family should be expected to contribute to college costs before you receive any financial aid. This number is referred to as the expected family contribution, or EFC.

In the federal calculation, your child's assets are treated differently than your assets. Your child must contribute 35 percent of his or her assets each year, while you must contribute 5.6 percent of your assets. (Note: The 35 percent contribution figure for student assets will be reduced to 20 percent beginning July 1, 2007.)

For example, $10,000 in your child's bank account would equal an expected contribution of $3,500 from your child ($10,000 x .35), but the same $10,000 in your bank account would equal an expected $560 contribution from you ($10,000 x .056).

Under the federal rules, an UGMA/UTMA custodial account is classified as a student asset. By contrast, Coverdell ESAs and 529 college savings plans are considered parental assets if the parent is the account owner (so accounts owned by grandparents or other relatives or friends don't count at all). And distributions (withdrawals) from Coverdell ESAs and college savings plans that are used to pay the beneficiary's qualified education expenses are not classified as parent or student income on the federal government's aid form, which means that some or all of the money is not counted again when it's withdrawn. Other investments you may own in your name, such as mutual funds, stocks, U.S. savings bonds (e.g., Series EE and Series I), certificates of deposit, and real estate, are also classified as parental assets.

And, effective as of July 1, 2006, the federal government treats prepaid tuition plans the same as college savings plans for financial aid purposes. Prior to July 1, 2006, prepaid tuition plans were treated more harshly than college savings plans under the federal financial aid formula. Specifically, a prepaid tuition plan wasn't counted as either an asset of parent or student, but any distributions (withdrawals) from a prepaid plan were considered a "resource" that reduced the cost of attendance at any given college, resulting in a corresponding dollar-for-dollar reduction in financial aid.

Regarding institutional aid, colleges are generally a bit stricter than the federal government in assessing a family's assets and their ability to pay college costs. Most use a standard financial aid application that considers assets the federal government does not, for example, home equity. Typically, though, colleges treat 529 plans, Coverdell accounts, and UGMA/UTMA custodial accounts the same as the federal government, with the caveat that distributions from 529 plans and Coverdell accounts are often counted again as available income.

A word of caution

The provision of the Economic Growth and Tax Relief Reconciliation Act of 2001 that increased the annual contribution limit for Coverdell ESAs to $2,000 is scheduled to expire on December 31, 2010. Unless Congress acts, after this date, the annual contribution limit for Coverdell ESAs will revert to $500, its status prior to January 1, 2002.

Also, please note that with respect to 529 plans, investors should consider the investment objectives, risks, charges and expenses associated with 529 plans carefully before investing. More information about 529 plans is available in the issuer's official statement, which should be read carefully before investing.

Copyright 2003 by Forefield Inc.

Develop an Estate Plan

It’s time to think about your mortality. Do it for your child’s sake.

If you have not already thought about estate planning, now is the time to start. By clarifying your goals and using basic estate planning techniques, you can ensure that your wishes will be carried out—and your children provided for—when you’re gone.

An estate plan not only lets you decide who gets what, it gives you a way to choose a guardian for your minor children. Other estate planning goals include minimizing taxes and avoiding a lengthy probate process.

As a new parent, just how much estate planning do you need? Here are the key tasks you need to accomplish soon after your child is born.

Write a Will

If you want your property to go to the people you designate, a will is a must. Without one, your state will select your heirs and allocate your assets according to its rules, regardless of your wishes. The process can be stressful and expensive for your loved ones. A will is also the only way to designate a custodian and/or guardian for your children.

Create a Durable Power of Attorney for Health Care

This document lets you name someone to make health care decisions for you if you’re unable to, such as whether to use life-sustaining measures to prolong your life. Many people use a simple form called “Five Wishes,” which you fill out and give to your doctors.

Create a Durable Power of Attorney

If you’re physically or mentally unable to take care of your finances, you’ll need someone to handle them for you. A Durable Power of Attorney assigns this responsibility.

Consider Setting Up a Trust

Trusts allow you to stipulate how your children can spend their inheritance and when they’ll receive the money or property you’ve left to them.

Consider Giving Gifts While You're Alive

In 2007, you can give up to $12,000 a year to as many people as you choose without you or them incurring taxes. Couples can give up to $24,000 ($12,000 each). 3

Other Tasks

Set up a filing system that includes information on all of your assets and investments, insurance information, will, and other financial documents. Then make sure the person you named in your Durable Power of Attorney knows where to find documents.

3Internal Revenue Service

Save on Your Taxes

Take advantage of Uncle Sam’s parenting tax breaks.

Educating yourself about the tax implications of parenthood can save you a lot of money. Specifically, you should understand how dependent exemptions, child-related tax credits and Flexible Spending Accounts work.

Dependent Exemptions

Regardless of when your child is born during the year, you will be able to file for an extra personal exemption on that year’s tax return. Each personal exemption reduces your taxable income. To claim the exemption, you must get a Social Security number for your child. Do this as soon as possible after the child’s birth. You can apply at any Social Security office.

Tax Credits

Having a child may qualify you for certain tax credits. You get to subtract these credits from the taxes you owe. If they are large enough, they may reduce the amount of tax due to less than you had deducted from your pay through federal withholding. When the amount you already paid through federal withholding is more than the total income tax you owe, you will receive a refund.

Here are tax credits you may be eligible for as a parent.

Child Tax Credit. With this credit, you may be able to reduce your federal income tax by up to $1,000 for each qualifying child under the age of 17.

A qualifying child is someone who meets these criteria:4

Is under age 17

Is your son, daughter, adopted child, stepchild or eligible foster child, sibling, or stepsibling or a descendant of any of these individuals

Is a U.S. citizen or resident alien

that some exceptions to this criteria exist

Earned Income Tax Credit. Also known as the Earned Income Credit (EIC), this is a credit for low-income working individuals and families. Congress originally approved the tax credit legislation in 1975 in part to offset the burden of Social Security taxes and to provide an incentive to work. When the EITC exceeds the amount of taxes owed, it results in a tax refund to those who claim and qualify for the credit.5

Dependent Care Credit. If you (and/or your spouse) work, are looking for work, or go to school and you pay someone to care for dependents (a child or elderly parent claimed as a dependent on your federal income return), you may be entitled to a Dependent Care Credit in addition to a Child Tax Credit.6

To claim this credit, you must pay someone whom you do not claim as a dependent to provide the care.

This person must provide you with a taxpayer ID number or a Social Security number. If you use pre-tax dollars from your employer-sponsored Dependent Care Flexible Spending Account to pay these expenses, you cannot use the pre-tax dollars you paid to figure the credit.

The amount of any Dependent Care Credit is figured as a percentage of the amount you paid for dependent care and that percentage is based on your income. To claim this credit, you must file IRS Form 244.

Flexible Spending Accounts

Employer-sponsored Flexible Spending Accounts (FSAs) allow you to pay for dependent care and medical costs with pre-tax dollars. The amount you contribute to your account is deducted from your annual earnings before being reported on your W-2 Form at the end of the year. Result: Your taxable income is reduced by the amount you contributed to your FSA.

How do FSAs work? Your total annual contribution is divided by the number of paychecks you receive and is deducted evenly from each of your paychecks. You pay bills out of pocket, then submit them according to your employer’s reimbursement instructions. Most employers allow you to submit bills up to the maximum annual contribution even if the full amount has not yet been deducted from your pay or deposited in your FSA. Drawbacks? You lose any money left in the account at the end of the year.

4IRS Tax Tip 2007-455IRS EIC page6IRS Topic 602

Plan for Adoption

Your heart is ready, but what about your budget?

Adopting a child is a big decision, probably bigger than education, marriage, or career. Depending on your choice of adoption method, your finances are in for a big challenge. The time to plan is now.

Using your local foster care system is the least expensive form of adoption. The cost might even be zero, since states often subsidize these programs to encourage placements. Meanwhile, agency and private domestic adoptions range widely in cost, depending on agency and attorney fees, travel expenses, birth mother health and living expenses, state requirements, and other factors. International adoptions are in the middle of that range even considering the travel, adoption agency, and other fees and expenses payable once you arrive in the adoption country.

Still game despite the financial hurdles of adopting? Then here’s what you need to do financially:

Create a financial plan or re-evaluate your existing one: A financial plan is a written set of goals and strategies and a timeline for accomplishing those goals. It starts with the basics, determining how much you already have in savings, debt, insurance and investments, then defines exactly how you’ll build on your resources to accomplish your goals.

Get rid of your high-interest debt: A major decision like having a child is a good reason to lower your debt load. Before you can build a reserve fund, try to pay off your credit cards and other high-rate debt first.

Make sure you have a solid estate plan: Today, adoptive parents are typically older and closer to retirement. That means you have to create an estate plan and a safety net of insurance and savings that will secure your child’s future if something happens to you. Also, if you are a single parent, estate planning becomes even more critical. You may also want to consider separate guardianship for the child and the child's finances.

Check your insurance options: Adding a child to a policy can bring additional costs. Before you start the adoption process, check with your employer or your independent insurance agent to make sure you have the best coverage for your needs at a cost you can afford. If you’re self-employed, family coverage becomes extremely expensive, so evaluate your options carefully. Also, keep in mind that you can put an adopted child on your health plan within 30 days of the adoption date. However, if you delay, you might have to wait until the next open enrollment to add the child on your insurance.

Know your tax advantages: Families adopting overseas can get tax relief. You are entitled to a one-time tax credit for adoption expenses. The credit can’t be reduced by the alternative minimum tax. Qualifying expenses include paperwork costs, court costs, attorney fees, and all travel expenses, including meals and lodging. This amount is phased out at higher income levels.

Build your reserve fund: When a baby, toddler, or older child comes into the house, money flies out at high speeds. Also, it’s possible that a birth mother’s health may take a turn for the worse during the pregnancy, creating unexpected medical bills. For these reasons, try to increase the size of your emergency fund before you finalize the adoption.

Single Parenthood

Single parenting is a challenge. Time to get creative about money.

Nearly thirteen million Americans are single parents. This is not an easy task because they not only have to work, they also clean, help with homework, shop, and run errands. Limited time and the pressures of child rearing can be stressful. Add to this the financial pressures of being the sole breadwinner. But don’t take these pressures sitting down. Take control of your finances today. Check out these helpful strategies for saving money:

Find affordable housing

Finding an affordable home isn’t easy. You may want to consider downsizing rather than jeopardizing your financial future. Carefully consider your monthly income, and be realistic about what you can and can’t afford. Another solution to the housing dilemma: find a roommate.

Secure your income

Wherever you end up living, concentrate on your biggest asset: earning potential. With no backup, your ability to make money is crucial. If hiring a babysitter so you can return to school means you’ll get promoted and make more money, then do it.

When you’re the sole breadwinner, you have all the more reason to protect your income against disaster. Most experts recommend carrying life insurance equal to six to ten times your salary.

You should also ensure that you have enough disability insurance either through your employer or on your own to protect you and your family in case you can’t work due to an accident or illness.

Scout for tax breaks

Parents who file as head of household usually pay a lower tax rate and are entitled to a higher standard deduction than single taxpayers and married couples filing separately. Parents may also be able to take a an exemption for each qualifying child, plus a tax credit for each child younger than 17 at the end of the year.

If your kids are in day care so you can work, you’re entitled to a dependent-care credit. But if you can contribute to a flexible spending account, in which you may set aside pretax dollars for child care, you’re probably better off using the FSA.

Be sure you either update or create a new will. One of the most important items to include is naming a guardian for your children. If you do not name a guardian, a judge will appoint one and it may not be someone you would have chosen.